Technical Analysis

Trading pick of the week: Buy CSB Bank

Yoganand D | Updated on November 08, 2020 Published on November 08, 2020

The stock of CSB Bank was listed on December 2019. Following a strong listing gain, the stock recorded a high of ₹313.5 but then started to decline.

Thereafter, it was on a medium-term downtrend until it registered a fresh low at ₹95.6 in late March this year.

The stock took support at around ₹100 in late March and changed direction, triggered by positive divergence on the daily relative strength index (RSI). Since then, it had been on an intermediate-term uptrend forming higher peaks and troughs.

But the stock met with a key resistance at around ₹240 in late August and began to move sideways with an upward bias. The price action from late August, until recently, appears to be forming an ascending triangle pattern with a horizontal line at ₹240.

On Friday, the stock jumped 7.9 per cent, accompanied by extraordinary volumes, decisively breaking above the significant resistance level as well as the horizontal line of the triangle at ₹240.

This breakout has strengthened the uptrend that had commenced from March lows; the short-term trend is also up. The stock trades well above the 50- and 200-day moving averages.

Both the daily and the weekly RSIs are featuring in the bullish zone, backing the stock’s rally.

The medium-term outlook is bullish for CSB Bank. It has the potential to extend the uptrend and reach the price targets of ₹275 and ₹300 over the medium term, with a minor pause at ₹275. Investors can buy the stock with a stop-loss at ₹235.

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Published on November 08, 2020
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